What is Value Engineering? Description
The Value Engineering method from Miles and Erlicher is a function-oriented,
systematic team approach used to analyze and improve the value in a product,
facility design, system or service. It is a powerful methodology for solving
problems and/or reducing costs while improving performance/quality requirements.
Value, as defined, is the ratio of Function to Cost, and can therefore be
increased by either improving the function or by reducing the cost.
The terms Value Engineering (VE), Value Analysis (VA) and
Value Management (VM) are used synonymously and interchangeably by
some people. The approach is sometimes also referred to as Value Control,
Value Improvement or Value Assurance.
Origin of Value Engineering. History
VE was developed in 1947 just after World War II at the General Electric
Company when a shortage of material and labors affected GE production. Lawrence
Miles was asked to explore why this occurred, and how cost reduction and performance
improvement could be achieved.
Costs in Value Engineering
Note that when value engineers talk about reducing costs, they could
be referring to either total life cycle costs or the direct costs
of production. Total life cycle costs are the total expenditures over the
whole life span of the product. This measure of cost is most applicable to
expensive capital equipment, and includes manufacturing costs, installation
costs, maintenance costs, and decommissioning costs. Individual expenditures
must be discounted to reflect the time value of money. When referring to consumer
products, the direct cost of production is more typically used. This measure
is limited to the costs directly associated with manufacturing the product.
Usage of Value Engineering. Applications
Areas in which VE can be efficiently and profitably utilized are:
- Engineering: Design, product improvement.
- Manufacturing: Material Handling, tool design and production.
- Purchasing: Manufacturer's vendor alternative proposals; new product
- Sales: Slow selling products.
- Systems and Procedures: Paperwork, forms processing, reproduction services.
- Maintenance: Procedures, material, work scheduling.
- Energy Conversion: Procedures, life cycle costing analysis.
- Construction: planning, scheduling, labor, consumables. Surplus usage.
Steps in Value Engineering. Process
The common terminology offers a standardized step by step Job Plan
of the systematic problem solving process and consists of four major phases:
- Information Phase. This phase involves defining of the problem
to be solved, evaluating the feasibility of implementing the VE study for
the problem, gather information about the problem, and allocate the required
resources and team to execute the study.
- Speculative Phase. This phase aims to develop alternative approaches
of providing the required functions at lower cost. The functional analysis
is developed by the Function Analysis Systems Technique (FAST), which is
a diagramming procedure that demonstrates the logical relations among the
functions of building, system, or component.
Upon creating the FAST diagram, the VE team shall start generating
a wide variety of ideas. This helps to optimize the solution of a value
improvement problem by increasing the probability of selecting the best
idea through brainstorming or other idea generation techniques.
- Analytical Phase. The purpose of this phase is to apply cost
comparisons and define the optimum alternative of those ideas generated
in the previous phase. The Life Cycle Costing (LLC) is applied to study
the lowest cost of the final selected alternatives.
- Proposal Phase. The purpose of this phase is to present results
of the VE study to the stakeholders, to obtain approval from the client
and to define concurrence and a commitment from the designer, project sponsor,
and other management to proceed with implementation of the recommendation.
Strengths of Value Engineering. Benefits
- Optimizes Quality/Performance.
- Reduces Total Life Cycle Costs of Projects or Processes.
- Minimizes waste in Manufacturing and Design Process by eliminating wasteful
- Simplifies and Improves Functional Reliability and System’s Performance.
- Identifies Potential Risks and Generates Solutions to Mitigate.
Limitations of Value Engineering. Disadvantages
- VE should be performed as early as possible before commitment of funds.
According to Pareto law 80% of the problem count represents 20% of the amounts
to be paid. Therefore the optimum timing for VE study is during the design
- The approach depends on team work, creativity concepts.
Assumptions of Value Engineering. Conditions
Cost cutting alone is not the main function or objective. Neither is improvement
Book: Miles, Laurence D - Technique in Value Analysis and Engineering
Book: Al-Yousefi, Abdulaziz - Value Management Concept & Techniques
Book: Stephen J. Kirk / Kent F. Spreckelmeyer - Enhancing Value
in Design Decisions -
Value Engineering Special Interest Group
Special Interest Group (96 members)
Working as part of an electrical design team for an expansion to the Alumina Refinery at Gladstone Queensland Australia I experienced first hand the u...
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